HomeBusinessAs GST revenues in April decline to Rs 4586 crore only, state...

As GST revenues in April decline to Rs 4586 crore only, state Economy rushed to ICU

Will Maha Govt dare to borrow from the open market?

Mumbai: It has been oft stated that the fiscal health of Maharashtra has always remained healthy even after implementing various pay commissions, imposing loan waiver schemes and even after a decrease in agriculture produce due to drought and flood situation. But  this time the novel Coronavirus pandemic has sent Maharashtra’s economy in the Intensive Care Unit (ICU). 

The major source of income, that is the revenue collection comes from Goods and Services Tax (GST) which has declined to a mere Rs 4586.73 crore in April. Due to which the state is unable to pay the salaries and pensions to lakhs of government employees. Leaders in ruling Congress, Nationalist Congress Party (NCP) and from opposition Bharatiya Janata Party (BJP) have repeatedly been recommending the state to borrow from the open market. But, the big question that is bugging everybody here is as to why Chief Minister Uddhav Thackeray and Finance minister Ajit Pawar do not show the dare to borrow loan worth at least Rs 1 lakh crore?

The real impact of the lockdown on GST revenue will only be reflected in the revenue collections in May and June 2020 (for business activity in April and May 2020) as the country has been in complete lockdown and where only essential services permitted. 

Apart from State GST (SGST), the state receives its share of revenue from the divisive pool of taxes of the union government through Central Goods and Services Tax (CGST) and Integrated GST (IGST). While presenting the annual budget for the fiscal year 2020-21 in the state legislature, Finance and Planning minister Ajit Pawar had projected the expected revenue share from CGST would be around Rs 14,561.48 and Rs 1,07,146 crore from GST.

But, from March this year, all manufacturing units and service sectors are almost shut down due to nationwide lockdown in Corona pandemic crisis.  Ultimately, the revenue receipts from various items have been reduced drastically. The only quite handsome revenue was collected through excise department as the government has given permission to sell liquor online. The excise collection till last week was around Rs 400 crore across the state. The revenue from stamp duty has started to fill up empty state coffers. 

Annual revenue from excise duty expected in the current financial year to be at Rs 19,225.13 crore whereas revenue receipts from stamp and registration fees are estimated to be at Rs 30,000 crore. 

The budget has estimated total revenues receipt as Rs 3,47,456.89 crore (approximately 3.47 lakh crore).

The budget has also projected the fiscal deficit in the year 2020-21 would be Rs 54,618.38 crore. On the other hand, the union budget has estimated fiscal deficit tuned to Rs 7,96,337 crores. 

According to Sharad Pawar, President of Nationalist Congress Party, Maharashtra will face a fiscal deficit of Rs 1.40 lakh crore and he has already written a letter to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman seeking financial support of Rs one lakh crore from the Central package to sustain the projected expenditure by the state.

Former Chief Minister Prithviraj Chavan has asked Centre to support financially to the tune of Rs 2 lakh crore in the way of Direct Bank Transfer (DBT) to the beneficiaries of various government schemes.

Whereas, former finance minister Jayant Patil had expressed the need of Rs 10 lakh crore to be pumped into the system to bring the derailed economy back on the tracks.

There is the difference between ruling and opposition party leaders over the Rs 20 lakh crore stimulus package announced by FM Nirmala Sitharaman. 

Devendra Fadnavis, Leader of Opposition has stated Chief Minister Udhhav Thackeray should take a bold decision and borrow from the open market. Jayant Patil, minister for Water Resources expressed that the Centre should give the loan at affordable interest rates and that Fadnavis should advice the Centre to be generous towards the State.

The senior bureaucrat from the finance department on condition of anonymity said that Maharashtra needs at least one lakh crore to sustain all projected schemes and to pay salaries and pensions to the employees. 

Maharashtra requires Rs 14,800 crore every month to disburse salaries and pension of its employees. The state could pay 30 to 50 per cent salaries in April and May and rest is put on hold due to paucity of funds.

“Until and unless, we will not resume works in infrastructure sector which generates huge employment and helps to revive economic activity, how can the state get direct and indirect taxes? Again, these works will need funds. Only saving or curtailing implementation of schemes and reducing unwanted wasteful expenditure is the right answer to revive the economy,” said the senior IAS officer.

Another retired bureaucrat who was a member of the committee formed to study the financial crisis gave an example of the loss incurred due to the postponing of marriages to caterers. “The business turnover of caterers and ‘mandapwala’ is pegged at Rs 40,000 crore across the country. There are several services related to a marriage. As two months have been wasted in lockdown and several couples have either postponed marriage or performed the ceremonies in a simple way in the presence of limited people.” 

 He further said that this business contributes to GST. Like this, there are several other hundreds of small allied businesses which are ruined, closed on a temporary basis or permanently shut down, this has collaterally affected the revenue receipts in GST. 

The committee of retired bureaucrats has recommended borrowing loan up to 5 per cent of state GDP which will be around Rs 1.50 lakh crore. However, according to sources in the government, CM Uddhav Thackeray does not want to borrow more than Rs 50,000 crore. This amount is equal to the annual borrowing by the state every year from Reserve Bank of India (RBI) or from other banks.

The bureaucrat said that Maharashtra has the capacity to overcome from the financial situation within the next one and half year even if the state were to borrow more than lakh rupee loan.

Jayant Patil argued that the interest of such loan should be minimal. As per the rules, RBI offers loan by the rate of 4 to 7 per cent to states. According to Patil, it is a very huge interest rate considering this current crisis. 

Maharashtra ministers complain that Centre has not given its share from the SGST and CGST. The amount is due up to Rs 15,000 crore. At the national level, the gross GST revenue collected in the month of March 2020 is Rs. 97,597 crore of which CGST is Rs. 19,183 crore, SGST is Rs. 25,601 crore, IGST is Rs. 44,508 crore (including Rs. 18,056 crores collected on imports) and Cess is Rs. 8,306 crore.  During this month, the GST on import of goods has shown a negative growth of (-) 23% as compared to March 2019.

Former Finance minister late Arun Jaitley has once suggested that GST council should take a loan to settle share of states and Union Territories (UT) to ensure the state can function smoothly.

Sources disclosed that the GST council is mulling over the suggestion of late Jaitley and also planning to the extent the five-year tenure to compensate GST cess to states/UTs to seven years. That means the state will continue to get the differential amount from actual GST collection and expected growth by the rate of 14 per cent annually till the year 2024. 

Fadnavis said that this two years grace period will be sufficient to settle loans taken during this Covid-19 period and the state will become financially sustainable by the year 2024.

Whatever be the views of leaders from both the benches, there is immediate, urgent need of pumping funds in the state economy through borrowings or if there is alternative to this, CM Thackeray should take the decision before situation becomes worst. The question is whether he has the courage to take a bold decision and bring life in the state back to normal?

Vivek Bhavsar
Vivek Bhavsar
Vivek Bhavsar is the Editor-In-Chief. He is a senior journalist having experience of more than 30 years in political and investigative journalism. He is the founder and Editor-in-Chief of TheNews21. He has worked with leading English mainline dailies, including The Asian Age, Free Press Journal, and also carries the experience of strides in leading regional newspapers like Lokmat and Saamana.

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